Week 4 Flashcards
According to the Williams Group, the most important reason family estate transitions fail is
A) There was failure to prepare heirs
B) The parents failed to prepare an appropriate legal and tax estate plan
C) There was failure of trust and communication within the family
D) There was not a large enough financial inheritance to make everyone happy
C) There was failure of trust and communication within the family
Trust and communication. Not preparing heirs is also important. Tax planning and total financial resources turned out to be much less important as causes of family dissolution and conflict.
When Williams and Preisser refer to “coaching the receivers,” he is referring to which of these?
A) The estate’s primary banker
B) The family heirs
C) Receivers in bankruptcy
D) The family’s most trusted advisor
B) The family heirs
These are the receiver. The quarterback is the wealth-holder.
According to John Scroggin estate planning should start with which of these?
I. Things and with the taxes imposed upon them
II. People, in the sense of who the clients were and are, and who their families are and might become
A) I Only
B) II Only
C) Both I and II
D) Neither I nor II
B) II Only
People First! Possessions second. We know this, but forget it when we get trained in asset transfer planning.
What is meant by a three-part allowance?
A) One part save, one part spend, one part for charity
B) One part now, one part later, one part if further chores are performed
C) One part automatic, one part earned, one part given at parent’s discretion
D) One part in cash, one part in an investment fund, one part given for the child to the parent’s choice of charity.
A) One part save, one part spend, one part for charity
This is a proven best practice in wealthy families.
Why might a child of wealth feel isolated?
I. Set apart by privileges and possessions classmates do not have
II. Raised largely by nannies, servants, chauffeurs, and paid professionals
A) I Only
B) II Only
C) Both I and II
D) Neither I nor II
C) Both I and II
Neither all children of wealth nor all wealthy families have this sense of isolation, but it is not uncommon.
Which of these statements about wealth planning is (are) generally true?
I. Advisors spend a great deal of time working with the parents who send the money downstream to the heirs (receivers).
II. Advisors spend a great deal of time coaching the heirs (receivers) how to hold onto the money they inherit and put it to productive use.
A) I Only
B) II Only
C) Both I and II
D) Neither I nor II
A) I Only
Generally, advisors spend time with the parents, not the heirs. This can result in the heirs being unprepared.
With regard to Millennials and Gen X, per Sharna Goldseker, which statement(s) is(are) true?
I. They are so accustomed to self-directed learning and interactive learning platforms that they thrive in a two-way learning environment.
II. They learn best by watching their elders in real-world settings, such as making gifts and participation in board meetings.
A) I Only
B) II Only
C) Both I and II
D) Neither I nor II
C) Both I and II
Sharna Goldseker makes both these points.
Addressing the issues of importance to wealthy families, the National Center for Family Philanthropy says that family philanthropy helps children develop a “view outside the airport.” Which statement(s) below is (are) consistent with the meaning of that remark?
I. Wealthy children lead privileged lives and need to see how others who are less fortunate live.
II. Wealthy children are themselves “at risk,” in that they may grow up with limited vision and without empathy for those in other walks of life.
A) I Only
B) II Only
C) Both I and II
D) Neither I nor II
C) Both I and II
The study in general and this remark in particular help us see that giving helps not only others but also the giver. Informed giving can bring a child or young adult from a privileged background into conversation with people from other walks of life. The child gains a moral perspectives that might otherwise be lacking. In their own way, wealthy children are also “at risk.” Their parents often know this, and are thus often receptive to strategies like family giving that will help their children to grow up with a balanced sense of what is important.
“Who is family?” Which statement or statements below draw out the meaning of that question for multi-generational wealthy families?
I. In every family, there are black sheep the family refuses to recognize
II. In wealthy multi-generational families, there are founders, children, grandchildren, cousins, and second cousins, along with in-laws, second and third marriages, and partners living together; hence, the boundaries of family are blurry.
A) I Only
B) II Only
C) Both I and II
D) Neither I nor II
B) II Only
Not all families have a black sheep or pariah. But all multi-generational families have blurry boundaries, as the nuclear first generation family evolves over generations into a tribe, then a clan. Parents, children, grandchildren, nephews, nieces, first and second cousins, in-laws, spouses of heirs, ex-spouses - - who is considered family, for the purpose of owning and controlling shared family wealth or receiving benefits from it? Who is inside the inner circle? Who is outside it?
According to a study by the National Center of Family Philanthropy, what is “generally considered the greatest challenge to be faced” by multi-generational family philanthropy?
A) Preserving clear focus on results
B) Partnering effectively with grantees
C) Maintaining foundation assets
D) Passing on the stewardship of the family philanthropy across generations
D) Passing on the stewardship of the family philanthropy across generations
Tracy Gary, herself a member of the extended Pillsbury family, speaks of “the intergenerational transfer of leadership.” Sharna Goldseker, also from a multi-generational wealthy family, makes similar points about how the generations must not only be in the same room when grants are made but must also learn to share the power. As anyone who works with those who have created wealth know, it is often very difficult for such individuals to share or give up control. Older people, too, often find it difficult to give up control. So, passing on the stewardship of philanthropy by empowering succeeding generations turns out to be the biggest challenge that these families themselves face.
“Whose money is it?” This question about the money inside a family foundation, is raised by a study by the National Center of Family Philanthropy. Which statement or statements below draw(s) out the meaning of that question?
I. The family made the money and may control the foundation: in that sense, it is “their money”
II. The foundation is established by law to serve the public interest, and therefore the money belongs to the community it serves.
A) I Only
B) II Only
C) Both I and II
D) Neither I nor II
C) Both I and II
Both statements are true. There is an important tension in a family foundations between the family that established and may still control it and the interests of the public that foundation was established to serve. As you follow debates in the public press or in Congress about family foundations, you will quickly hear both points made: “The family controls it and should control it: they made the money, they gave the money, they can name all the trustees, and they legally control things.” On the other hand, “The foundation exists by law to serve the public interest: the money was given away: the money was given a tax break; therefore, the trustees should treat the money as belonging to the public and should serve the public as fiduciaries; if they don’t, the law should step in and make them do so.” Both sides of this debate have merit, and the two remain in tension.
In what percentage of cases do advisors lose control of money under management when the wealth passes to the next generation?
A) 10-20%
B) 40-50%
C) 60-75%
D) 90-95%
D) 90-95%
91% - This is all the more reason to think of family as the client and to involve the rising generations. Philanthropy can be a good way to do so.
With respect to preparing heirs to receive a significant inheritance, which statement or statements below is (are) correct?
I. The majority of parents say it is important
II. The majority of parents have established formal or informal programs to prepare heirs.
A) I Only
B) II Only
C) Both I and II
D) Neither I nor II
A) I Only
Yes, the majority of parents know preparing heirs is important, but only about 35% have actually done anything about it.
With respect to preparing heirs for a significant inheritance, which statement or statements below is (are) correct?
I. Heirs who are prepared are more confident that they can handle the money well.
II. Preparation provided by advisors is generally more effective than that provided by the family informally
A) I Only
B) II Only
C) Both I and II
D) Neither I nor II
C) Both I and II
Both are true. This question highlights an opportunity that advisors have to step up.
When the Williams Group references “coaching the receivers,” they are alluding to which of these?
A) Heirs who will be expected to “receive” the family assets
B) Heisman trophy winners
C) Future NFL wide receivers
D) Parents looking to pass on the family assets
A) Heirs who will be expected to “receive” the family assets
A great analogy isn’t it? We then to coach the wealth holder, the quarterback, but the receivers (heirs) need it just as much or more, since they are inexperienced.
